Ottawa’s fight with provinces is about more than job grants
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It’s been a year since the federal government announced its plan for a new Canada Job Grant program (CJG) and we are apparently no closer to a negotiated agreement on its future. Provinces have had serious reservations about the program since day one for good reasons. Despite the federal government’s repeated promises not to cut transfers to provinces, it has now signalled its intention to do exactly that.

Tuesday’s budget appears to confirm that the federal government will fund the CJG by cutting transfers from the Labour Market Agreements (LMAs). These agreements fund programs for basic literacy and numeracy for vulnerable workers who are not eligible for training through Employment Insurance.

Although basic details about the CJG are still unknown, the federal government is portraying it as a response to the so-called “skills mismatch.” It will provide companies with subsidies to train reasonably skilled workers who need training upgrades to take up positions in their firms. This is unlikely to have any effect on broad-based skills shortages (if they exist) and it is unclear why companies supposedly facing dire labour shortages need public money to subsidize their internal training budgets.

But even those who think the CJG is a good idea must surely acknowledge that it targets an entirely different population than the LMAs. The two are designed to solve entirely different policy problems. Why the federal government would fund subsidies to employers by cutting funding to programs designed to help street youth learn basic skills is mystifying.

While every province will be affected by cuts to the LMAs, Ontario has even more at stake. The agreements were put in place because of wide agreement that the federal training programs funded through Employment Insurance fail to serve Ontario’s unique labour market.

Most of Ontario’s unemployed are not eligible for the job training programs funded through Employment Insurance. Every year Ontario employers and workers pay more in premiums than they ever get back. For example, about 42 per cent of Canada’s unemployed live in Ontario. Ontario employers and workers pay about 40 per cent of the EI bill, but only about 31 per cent of all federal job training dollars go to Ontario workers. When the CJG comes into effect, this will drop to 30 per cent.

The federal government is counting on Canadians to ignore all of the arguing between provincial and federal politicians as more whining and bickering – or too technical to actually understand.

But in fact the federal attitude toward the provinces – and Ontario in particular – is corrosive to federal-provincial relations. If we really want to solve our biggest national challenges, governments need to trust and respect one another. They may disagree, but they must believe there is goodwill and shared interests on either side.

A co-ordinated intergovernmental approach to human capital – with participation from employers, labour and the education sectors – is necessary. We are today a long way from that.

The federal government repeatedly promised it would not cut transfers to the provinces. Any way you slice it, the federal government is planning to do exactly that.

Earlier this week, in defending the CJG, the federal finance Minister lashed out at the provinces, saying they should mind their own business and stop telling the federal government how to spend its money.

Actually, provinces are just asking the federal government to keep its commitment to not balance its books on their backs. The federal government has been accumulating an increasingly long record of downloading by stealth. In the case of the LMAs, provinces will either have to shut down programs that work or re-direct funds from their own budget. For a province like Ontario, that will be a huge challenge.

The downloading by stealth has been going on for years, but this time the provinces appear united – and no longer seem afraid of the federal government’s implicit threats to punish the citizens living in provinces that dare to call out the federal government for breaking its commitment to them.

Matthew Mendelsohn is the Director of the Mowat Centre at the School of Public Policy & Governance at the University of Toronto. He served as a deputy minister in Ontario and helped negotiate the Labour Market Agreement, the Labour Market Partnership Agreement and the Labour Market Development Agreement between the federal and Ontario governments.